Oct 29, 2026 earnings call — Record quarter; Compass Lexecon drag removed
Company reported revenues exceeded $1 billion for the first time and adjusted EPS was $3.84.
Revenue $1.0B (est $1.0B) · EPS $3.84 (est $2.74)
Key quotes
"It is simply the. I never know if it is the inverse, the obverse, or the reverse of this, but instead of econ averaging $22 million year-on-year drag a quarter over the last five quarters, it was accretive."
"Our revenues exceeded $1 billion for the first time. All five of our segments delivered top-line growth. Adjusted EBITDA grew 18%, and adjusted EPS was $3.84."
Analyst Q&A 3
Earnings quality and econ recovery
Q (Tobey Sommer · Truist): He asked whether to use GAAP or adjusted earnings to judge quality and durability. He also asked for a medium-term expectation for econ segment EBITDA and the cadence of forgivable loans.
A: Steve said restructuring charges are not expected to recur and the litigation expense is anomalous. He said GAAP and adjusted earnings should be the same next year. He said a modest recovery in econ is likely over several years and he guessed they will burn off $50 million of forgivable loans this year and replenish far less.
"Apart from that, I don't see any reason why GAAP earnings shouldn't be the same as adjusted earnings next year." — Steve Gunby (CEO·CHAIR)
Q3 margins and fraud demand
Q (Andrew Nicholas · William Blair): First, he asked what drove the strong third-quarter margins besides success fees and whether any special charges or restructuring helped. Second, he asked whether demand for fraud investigations, including AI-enabled fraud, is growing in FLC's pipeline and how durable that could be.
A: Angela said a large CF success fee boosted margins and econ had one-time benefits like a PTO true-up and lower bad debt that helped this quarter. She said headcount actions focused on construction services outside the U.S. and weak regions, and they disclosed about $80 million in annual benefits with around $15 million of benefits expected in Q4 related to the special charges. Steve said FLC has handled big private credit fraud assignments and that AI is a driver; they have rare capability to analyze AI algorithms for bias and have seen some of their largest cases in the last two years.
"As you pointed out for CF, we had a large success fee that a lot of it falls to the bottom line, so it helps their margin significantly." — Angela Nam (CFO)
Staffing cuts, Q4 slowdown, election impact
Q (James Yaro · Goldman Sachs): He asked whether the headcount actions are structural or cyclical. He also asked why implied fourth-quarter EPS drops so much and whether the midterm elections will affect the business.
A: Steve said the cuts are not cyclical and that they must clean up bets or markets where they lack a competitive position, even if that leads to restructuring charges. He said the third quarter had several one-time positive items (like the large success fee and a favorable tax rate) so a drop into the fourth quarter is in line with normal seasonality. On elections he said historically the firm controls its destiny more than elections and he would not expect a major impact unless something extreme happens.
"What we have to do is if we make bets that don't make sense, either we don't have a competitive position and we can't, or we made the wrong choice of person or something, we have to make those bets forcefully." — Steve Gunby (CEO·CHAIR)